Regarding the situation with Hanjin Shipping, we are sharing in our third update what we have learned since yesterday:

Hanjin has reportedly been granted receivership in Korea and a court-appointed administrator has been put in place to act on Hanjin’s behalf to administer and manage the wind-down of Hanjin Shipping. This is important because, as previously mentioned, it allows for the process of settling liens, holds, etc. to begin. It also allows Hanjin Shipping to file for Chapter 15 Bankruptcy Protection here in the United States, which they intend to do today.

What is Chapter 15?

“The purpose of Chapter 15 is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country. One of the most important goals of chapter 15 is to promote cooperation and communication between U.S. courts and parties of interest with foreign courts and parties of interest in cross-border cases. This goal is accomplished by, among other things, explicitly charging the court and estate representatives to "cooperate to the maximum extent possible" with foreign courts and foreign representatives and authorizing direct communication between the court and authorized estate representatives and the foreign courts and foreign representatives. Chapter 15 also gives foreign creditors the right to participate in U.S. bankruptcy cases and it prohibits discrimination against foreign creditors (except certain foreign government and tax claims, which may be governed by treaty).” Source: uscourts.gov

Why is this so important?

It simply allows the process, not only in Korea, but here in the United States, for the bankruptcy proceeding to begin. It also allows Hanjin and its court-appointed administrator to file injunctions against those that have placed holds or liens on vessels, equipment, etc. so that it can operate through the bankruptcy proceedings while settling liens, payments, receipt of funds, cargo releases, etc.

What are other carriers doing?

Carriers are scrambling in Asia to provide capacity as quickly as possible to replace the 30,000 x Teus per week that Hanjin used to carry from Asia to the US. That’s a staggering amount to replace quickly, and it may take until mid-October for carriers to replace that lost capacity entirely (if they even do) and for that capacity to be put in to regular rotations. What we have learned so far is that there will be extra loaders in the next few weeks, details as follows:

Hyundai: Firm new service beginning 9/11/16, servicing Shanghai, Busan, Kwangyang with 5,000 x Teus vessels primarily servicing Korean shippers impacted the most from Hanjin’s bankruptcy. G6 members reportedly will not have access.

Yangming and Evergreen: Releasing vessels from dry-dock to add extra loaders but no firm schedule yet.

We at Laufer will have access to these extra loaders as well as others as they are announced and introduced into the rotations. Until rotations become stabilized, and competing carriers introduce enough capacity to make up for the immediate loss of 30,000 x Teus per week, the market rate levels will continue to increase and space will remain incredibly tight. For US imports, carriers are implementing previously filed (but postponed) Peak Season Surcharges, Second Stage Peak Season Surcharges and October 1, 2016 GRI as follows:

This is particularly challenging as not only are we going to lose the Hanjin capacity effective immediately, but bookings on CKYH+E Alliance members on Hanjin vessels have been canceled and have had to be rebooked on other carriers and vessels. The acute loss of capacity, happening so suddenly, will impact exporters significantly. As you can see from the above, the extra loaders that carriers are adding will be commencing their voyages in Asia, and hence not arrive here in the United States to carry export until mid-October at the earliest. Carriers have filed GRIs for US Export as well to be effected October 1, 2016 and November 1, 2016. We expect those increases to go into effect and for space and equipment to become tight. We are instructing all our export customers to book early and reserve space as quickly as possible and to be flexible with carrier and service selection.

Where’s all the Equipment?

The easy answer: stuck on a Hanjin vessel. Equipment will be in acute shortage all over the world, but most acutely felt by US exporters, who are always struggling to get the right empty equipment at the right location at the right time. With all the Hanjin vessels in limbo, that will keep CKYH+E equipment from flowing effectively to where it is needed. And without those vessels returning empties to Asia from the United States, equipment will be in short supply in Asia as well for US imports. It is simply stuck. So again, we are urging our customers to book early and be flexible with carrier selection, transit times and to be mindful of increases in market rate levels.

Our priority as we navigate this unprecedented situation, is to keep your cargo flowing as quickly and as seamlessly as possible, given the current conditions – and to communicate effectively along the way. We will get through this together.